Chap 1 pfin
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Chap 1 pfin



Chapter 1, Finance 8 Power Point

Chapter 1, Finance 8 Power Point



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Chap 1 pfin Chap 1 pfin Presentation Transcript

  • Understanding the Financial Planning Process #1
  • The Rewards of Sound Financial Planning
    • Maintain and improve standard of living
    • Control spending in order to live well today and tomorrow
    • Accumulate wealth
  • Improving Your Standard of Living
  • Average American Family
  • The Personal Financial Planning Process
    • S ystematic process that considers important elements of an individual’s financial affairs in order to fulfill financial goals
  • Six-Step Financial Planning Process
    • 1. Define financial goals
    • 2. Develop financial plans and strategies
    • 3. Implement financial plans and strategies
    • 4. Develop and implement budgets
    • 5. Use financial statements to evaluate results
    • 6. Redefine goals, revise plans as situations change
  • The Role of Money
    • Medium of exchange used to measure value
    • Utility amount of satisfaction derived from purchases versus cost
    • Link to personal psychological concepts and key role in personal relationships
  • Attain Your Financial Goals
    • Set specific goals and focus on results
    • Make goals realistic
    • Involve family members and others
    • Prioritize goals and set a time frame
  • Put Target Dates on Financial Goals
    • Short-term in the next year
    • Intermediate-term the next 2-5 years
    • Long-term 6 years or more
  • From Goals to Plans: A Lifetime of Planning
    • Early childhood
    • High school and college
    • Family formation
    • Career development
    • Pre-retirement
    • Retirement
  • Personal Financial Planning Life Cycle
  • How a $1,000 Investment Grows over Time
  • Plans to Achieve Your Financial Goals
    • Asset acquisition planning
    • Liability and insurance planning
    • Savings and investment planning
    • Employee benefits planning
    • Tax planning
    • Retirement and estate planning
  • Using Professional Financial Planners
    • Types of planners
    • Commission-based – earn commission on financial products sold
    • Fee-only – charge fees based on complexity of the plan
  • The Planning Environment
    • Financial planning takes place in a dynamic economic environment created by the actions of
      • Government
      • Business
      • Consumers
  • Financial Planning Environment
  • Government
    • Federal government plays a major role in regulating the level of economic activity
    • Taxation and regulation constrain personal financial planning
  • The Economy
    • Monetary Policy
    • Controls money supply
    • Used to stimulate or contract economic growth
    • Fiscal Policy
    • Controls levels of taxation
    • Sets levels of government spending
  • The Economy
    • Economic Cycles
    • Stages related to employment and production levels
    • Growth measured by changes in GDP
    • Inflation
    • Measured by changes in CPI
    • Affects purchasing power and interest rates
    • Affects financial plans and goals
  • The Economic Cycle
  • What Determines Your Personal Income?
    • Demographics and income
      • Age, marital status
    • Education
    • Where you live
    • Career